Gold mining company Pacific Rim cuts operations in El Salvador

Canadian gold mining company, Pacific Rim is blaming an anti-mining atmosphere and politics for its decision to suspend drilling operations and lay off workers in El Salvador according to reports today:

TORONTO, July 3 (Reuters) - Pacific Rim Mining has cut its work force and suspended drilling in El Salvador due to frustration over a lengthy permitting process for its El Dorado gold mine, the Canadian company said on Thursday, sending its stock down by 34 percent.

However, the company will not abandon the assets and has ruled out selling them, Chief Executive Thomas Shrake said in an interview.

El Dorado "is a very attractive mine, high margin, environmentally solid, and the other projects that we have just have extremely high odds of success," he said.

In addition to El Dorado, Pacific Rim owns the Santa Rita and Zamora gold projects in the Central American country. It also owns a 49 percent interest in the Denton-Rawhide gold mine in Nevada, as well as the Carrera and Colina gold projects in Chile.

Pacific Rim's shares fell 27 Canadian cents to 52 Canadian cents on the Toronto Stock Exchange.

El Dorado, which has measured and indicated resources of 1.1 million ounces, would represent the first new precious metals mine in the country in 70 years, Pacific Rim said.

The company started the permitting process in 2004 but it became bogged down in 2006. Shrake attributed the delays in part to the government's concerns about potential public opposition because of the environmental impact of mining.

"I think the real issue here is politics," said Shrake.

"They have no technical issues. The mine we've designed would probably be the single most advanced environmental designed mine of its kind anywhere in the Americas."

With little movement, the company decided to halt drilling and slow its exploration activities until it gets some indication of movement on the part of the government, he said.

John Hayes, an analyst at BMO Capital Markets, said that as the first modern mine in El Salvador is decades, El Dorado's development has implications for how the country is seen as a target for mining investment.

"The thing we'll look for is what kind of response this gets from the government and whether they realize that you can't expect people to invest if they don't have some certainty of an outcome," he said.

Pacific Rim, which has spent about $77 million to date on gold exploration an development in El Salvador, will continue to try and secure a mining permit through diplomatic efforts and pursue its rights in the matter.

In the meantime, it will shift its exploration efforts to Costa Rica and Guatemala, which the company said in a statement were geologically similar to El Salvador, but "more politically stable for mining investment."

The company has has laid off 42 employees in El Salvador and could lay off more of its remaining 225 employees if the issue isn't resolved soon, it said.

Emotions are running very high on the mining issue in this country with almost unanimity among civil society organizations opposed to mineral exploration. Pacific Rim's arguments that it is proposing an operation which will eliminate environmental risks and create employement and revenues for the country are falling on deaf ears. Pacific Rim is right -- this is politics, but El Salvador is a democracy and the citizens have a right to refuse to adopt laws permitting mining.

I have to second what El-V had to say. it is not the "civil" society organizations that are trying to create jobs in El Salvador. They don't live by democratic priciples either but espouse change by violence. Sure, these groups financed by bleeding hearts from the north that have jobs and already have their nice lives are unanimous in their willingness to halt progress in El Salvador. They fail to remember that democracy means that you live by the laws that are in place. If you don't like them, then follow the democratic process to change them. The "civil society groups" such as OXFAM (which by the way stands for Oxford Famine Relief should not be involved in politics or anti-mining issues) need to quit aiding ex-guerilleros to fill their pockets and actually do something to foment development.If Pacific invested in El Salvador under the premise that El Salvador was a law abiding country then they deserve to get their permits and anybody who has invested deserves the same right until the law changes. In most civilized countries it is known as Grandfathering and as a lawyer Tim should be aware of this. If El Salvador doesn't want to be painted with the backward thinking 3rd world nation brush they need to obey their own laws and get in the game. They nearly lost Calvo, they are in the running to lose Energia Fonseca,and may have lost mining. When are the people here going to realize that they have to stop letting a bunch of foreigners dictate their own future? They have to start thinking for themselves and decide what will be best for them and El Salvador. The polls, depending on who takes them, don't show unilaterally that the inhabitants are against mining. Obviously countries like Guatemala and Costa Rica have seen fit to realize that mining done well can be of worth in their respective countries. Nobody here can say that the president of Costa Rica is somebodies lackey after looking at the awards and honors he has recieved.

as i've said before, the problem for this project in El salvador is that the population is not ready for something like this. there should not be anything wrong with responsible mining and development projects, problem is, the public is too ignorant right now to really come up with a solid stand based on logic. people all over el salvador, not just chalate, need to be educated and know what is going on and what they're talking about before they make a positive decision and stick to it. so i am glad this project has been put on hold for the time being. i think a few years down the line people will be better suited to make a sound and proper decisin, but right now it is not the time yet.

When will they be ready? When OxFam says so? When they have had twenty more years to stew in the poverty and see the degeneration of society due to the lack of jobs and the failure of the family structure due to heading north to find jobs. I agree that the mines won't solve all the problems but if one mine means that you have a complete family for every worker at the mine it has accomplished something. I know a family in San Salvador where the father recently came back to El Salvador to visit after 11 years in the north. He finally met the son born after he left. Yeah he is supporting his family but wouldn't it be better if he had the opportunity to find meaningful work here? How does inner self make the determination that El Salvador isn't ready? Is he professing omnipotence? That seems mighty arrogant to me and I don't see how time is going to change a group of people from ignorant to informed when all they get is the negative information and only want to believe that side of the story anyway. If people were rational and logical thinkers this would not be an issue, but people in El Salvador tend to be emotional and not logical. The fact that other countries of Central America have seen fit to look past the emotional fear mongering of the NGO's and allow responsible mining blows that argument out the water. The mining companies can't make mistakes because there are to many people looking over their shoulders waiting for them to fall on their faces.

Mining, by a private company, without any government co-ownership, really is mostly about plundering and carpetbaggin.

And I said co-ownership, not co-administration, nor co-running-of-daily-and-technical-affairs.

But, as usual, the Govt, would have given the concession with all tax exemptions and would only get in return the meager payments of the 120+ workers and would be stuck at the end with the clean up bill, since we have no regulatory bodies in El Salvador to rein in the "Green Miners".

Really a bad bargain, if this was so.

If the Damned mine is so profitable, then have the government give such concession keeping a 51% ownership for itself, or even a 60%. If the mine is so profitable, even at those rates it should be a bargain for the mining company.

And make the bastards comply with the SAME environmental laws they apply in Canada or wherever the hell they are from in the first world.

Let the miners run its daily operations, but let all that profit go into governmnets coffers directly to give services back to the population.

Otherwise, it would just be bad business for all of us, because the trickle down economics never really worked for most of salvadorans, and the transfer of technology from mining is really seldom of use anywhere except deep holes going nowhere.

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